Behavioral strategy

Maciej Workiewicz

Chapter 11 in A Guide to Key Theories for Strategic Management, 2026, pp 189-206 from Edward Elgar Publishing

Abstract: Behavioral strategy brings behavioral realism to strategic management by grounding theories in how organizations actually function rather than how they should in theory. This approach examines how cognitive limitations and environmental complexity jointly shape firms’ strategic decision-making. Organizing emerges as a solution to individual cognitive constraints, using structures, routines, and different learning mechanisms to process information and coordinate action. However, organizing introduces its own pathologies, such as goal ambiguity and politics, inertia, myopia, learning traps, and information distortion, among others. Behavioral strategy focuses on designing decision environments that achieve "sufficient intelligence" rather than optimality through balancing exploration and exploitation, managing inherent tensions, and improving the firm's decision environment. This chapter examines the theoretical foundations of behavioral strategy, distinguishes it from rational actor models and related approaches, and demonstrates its centrality to key strategic management concepts, including strategy formulation, adaptation, and decision-making under uncertainty and complexity.

Keywords: Behavioral Strategy; Bounded Rationality; Organizational Design; Organizational Learning; Organizational Adaptation; Routines (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035342846
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